This is one question we’ve had to answer many times from Lenders in those loans, potential lenders and other concerned individuals, so we realised it’s best to give a detailed explanation and updates in this regard.
The initial FINT model was to allow everyday Nigerians access to affordable loans without collateral and Lenders to earn higher than average returns from funding these loans. To build a solid model and minimise the risk of default on the part of the borrowers we did 6 things;
- A Risk Analysis Algorithm
- Physical office and Home Verification
- Compulsory Loans Insurance
- Multiple Payback Channels
- Automated Account sweeps
- Debt Recovery Partners
Risk Analysis Algorithm:
Before any borrower can take a loan on FINT they are required to take a Risk Assessment Test that determines their eligibility. This test asks a couple of questions about their income, expenses, dependants, and other demographic questions. On completion of this test, they are assigned a Risk Score which determines if they are able to get a loan and the applicable interest rate.
The 6 month account statement of the borrower was also analysed to ensure that the inflow and outflow matches the information they provided us during the test and to be sure they do not have any obligations that may impact their ability to pay back the loan.
In some cases, we offered borrowers a lower amount than they requested based on the analysis of the account statement.
After the assessment, the more credible borrowers got lower interest rates and vice versa. However, there is a risk threshold whereby the borrower will not be eligible for a loan on FINT. Only 12% of people that take the test qualify for the loan and we get a lot of feedback from borrowers that the process was too tedious.
We had to do this to protect lenders.
Physical Office and Home Verification:
The second stage of the process involves our representatives visiting the registered home and office address to confirm the information provided. Borrowers that fail this verification are not allowed to continue their loan application.
Compulsory Loan Insurance:
We partnered with Old Mutual and mandated all borrowers to take insurance on their loan. The insurance company is to pay back principal and interest to lenders in the event that employed borrowers are unable to repay their loan because they lost their jobs, are critically ill or lost their life.
This is a novel idea that does not exist on any other peer to peer lending platform.
Multiple Payback Channels:
Borrowers are to pay back principal and interest monthly, so a reminder is sent a few days before the due date via sms and email informing the borrower to make funds available. To make this process even easier, the borrower’s debit card is automatically charged on the repayment date, if the account is not funded with the required amount, another attempt is made.
Borrowers are also provided with the company’s bank account details to make payment. In addition to these, borrowers can login to their dashboard to make early repayments of their loans at any time.
Automated Account Sweeps:
Our tech team implemented a feature that allows us to recover percentages of outstanding repayments from borrowers account in the event that the account is not fully funded. For example, if the borrower’s due repayment is N 40,000, the transaction would normally fail if this person only has N 20,000 in the account and we cannot attempt a charge too frequently not to be flagged by the payment processor, but with this feature, the account will be charged up to 10% of the outstanding payment.
Debt Recovery Partners:
We’re partnered with a number of debt recovery companies to go after borrowers who have defaulted on their loan repayments or have not made payments for at least 2 months. These debt recovery partners provide the same services to banks and other financial institutions. We have also instituted legal proceedings alongside.
Where are we today?
All of these measures we’ve put in place prevent default, as the credit space in Nigeria is still evolving.
Before we pass on a borrower to our debt recovery partners, we reach out to them via several calls and emails to understand the challenges they may be facing with repayments, for those who lost their jobs, we ask them to provide us with the required documents to make an insurance claim.
We’ve successfully made claims for a number of borrowers and the respective lenders have been repaid by the insurer.
For the borrower passed on to the debt recovery partners, we’ve been able to recover some payments and have remitted to the lenders. Some of those borrowers no longer work or live at the addresses provided and have now been traced to new addresses.
We have suspended all personal loans requests and transitioned to providing only low risk investment opportunities in partnership with reputable companies to lenders on our platform, we also make sure to provide all the details on each investment so our lenders understand how the products work before they invest, especially how the interest is earned.
We ensure to remit all recovered funds to the lenders of these defaulting borrowers every month, we also call and send emails every month to give updates on the recovery efforts and progress made.
We continue to explore all avenues within the law to recover these funds and we are confident that these efforts will yield results (as they have started to) in a matter of time. We are thankful to our all lenders for their patience and understanding.